FX Update: RBA surprises hawkish again, extending AUD gains. FX Update: RBA surprises hawkish again, extending AUD gains. FX Update: RBA surprises hawkish again, extending AUD gains.

FX Update: RBA surprises hawkish again, extending AUD gains.

Forex 5 minutes to read
John Hardy

Head of FX Strategy

Summary:  The Australian dollar jumped overnight on Australia’s RBA surprising for the second time in a row with a 25-basis point rate hike and guiding for more possible hikes at coming meetings. This has taken AUDUSD to pivotal levels while the US dollar remains firm elsewhere, particularly against the European majors. The coming days and weeks will show us whether the massive incoming US Treasury issuance will support the US dollar via tighter liquidity.

Today's Saxo Market Call podcast

FX Trading focus:

  • AUD rallies on second consecutive surprise hike from RBA
  • The waiting game on USD as liquidity/Treasury issuance test lies ahead.

Trading and bias notes:

  • AUD: RBA surprise hike inspires AUD jump – huge resistance level in AUDUSD tested today at 0.6680+. The full bullish reversal is not in play yet until this level is broken (and USD elsewhere quite firm today). AUDNZD continued higher, but looking very overbought – next key resistance into 1.1088 pivot high from February (and high since last October.)
  • USD: the sell-off attempt late last week led nowhere and was quickly countered. Looking for ways to express a long view again with potential fuel to come from liquidity pinch as US treasury rebuilds its reserves after the lifting of the debt ceiling. Climax reversal of GBPUSD suggests new downside test ahead as long as pair remains below 1.2450 area. The recent pivot low there is 1.2308. EURUSD has more room to range lows into low 1.0500’s.
  • SEK and NOK: sell-off in EURSEK and EURNOK quickly gathered up, back to neutral on SEK and NOK.

AUD: yet another surprise hike from the RBA
For the second consecutive meeting, the RBA surprised expectations with another 25 basis point rate hike, taking the cash rate target to 4.1%. The RBA’s statement indicated that while it felt inflation was past its peak, that it would require some time for it to return to the target range and that the move was aimed at increasing confidence that inflation would fall. The statement also noted wage pressures rising (As it began increasing rates last year, much of the RBA focus was on weak wage growth as a reason to take a slow approach to hiking rates), particularly in the public sector. Recent house price rises were also noted and the Bank guided for possible further policy tightening going forward: “some further tightening of monetary policy may be required”. The move sent AUD higher still, but without more support from the commodities market and risk sentiment, the AUD may be nearing its ceiling for now. A weak CNH is also a potential drag as dark clouds continue to dog the Chinese recovery story.

We noted on Friday that the AUDUSD threatened a reversal on a move back above the 0.6600 area, which was the important area on the way down to the recent lows, but also noted that a full take-out of the 0.6700 area would be important for “a more emphatic reversal”. The RBA’s surprise hike has the pair poking at this important area, which includes the 0.618 retracement of the recent sell-off in the 0.6680 area and then the 200-day moving average a bit higher. A weak close today would put the pair back in limbo – stay tuned, and worth noting that Australian 2-year yields have already erased about half of the reaction to the surprise hike overnight.

Source: Saxo Group

USD: broader picture mixed as liquidity on rising Treasury issuance on watch.

Plenty of confusion for USD traders since it became quite clear that the US debt ceiling would be raised late last week. The brief USD sell-off from mid-last week reversed Friday and the USD firmed a bit more in places today. The data has generally provided a confusing backdrop. Friday’s strong May Nonfarm Payrolls change number of almost +300k plus a strong positive revision of the prior two months’ data was the only positive among many negatives. Among those were pronounced weakness in the household survey that is used to calculated the unemployment rate, which jumped a full 0.3% to reach 3.7% last month without any pick-up in the participation rate. Except for the explosion of the unemployment rate on the pandemic outbreak in early 2020, it would be the sharpest rise in the unemployment rate since 2010 if it holds without a revision. Also disappointing were the slightly weaker than expected average hourly earnings growth, importantly despite another 0.1 drop in the average weekly hours to 34.3. That level matches the range lows for weekly hours since 2011 (not including early 2020 spike). The downtrend in weekly hours suggests weakening labor utilization/rising spare capacity. Then yesterday’s May US ISM Services at 50.3 suggests that the dominant services sector of the US economy is at stall speed at best.

And yet, the incoming US data won’t be much of a focus this week, with the next test the CPI release next Tuesday. Meanwhile, a record pace of treasury issuance as the US Treasury is set to rebuild its reserves will be an important factor to monitor as it will pressure USD liquidity and possibly risk sentiment.

Table: FX Board of G10 and CNH trend evolution and strength.
USD strength remains, but needs refreshment to indicate the greenback remains in a bull trend. Elsewhere, the AUD and CAD are riding tall but the air could be getting thin for both without further boosts in commodity prices and perhaps risk sentiment. The CNH weakness remains quite pronounced and persistent.

Source: Bloomberg and Saxo Group

Table: FX Board Trend Scoreboard for individual pairs.
AUDUSD is making a bid for a bullish reversal today in the trend, but note the caveats in the chart above. GBPUSD is tilting back lower, really needing to break the low 1.2300’s area to suggest a proper downside break.

Source: Bloomberg and Saxo Group

Upcoming Economic Calendar Highlights (All times GMT)

  • 1400 – Canada May Ivey PMI
  • 2320 – Australia RBA’s Lowe to speak
  • 0130 – Australia Q1 GDP

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.